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Apex Corporation is considering the purchase of Pinnacle Company in a stock-for-stock exchange. Selected data on the two companies are shown in the following table
Apex Corporation is considering the purchase of Pinnacle Company in a stock-for-stock exchange. Selected data on the two companies are shown in the following table
| Apex Corporation | Pinnacle Company | |
| Sales | $750 | $175 |
| Earnings after taxes (millions) | $100 | $20 |
| Common Shares Outstanding (millions) | $50 | $20 |
| Share Price | $40 | $15 |
| Earnings per share | $2.00 | $1.00 |
| Dividends per share | $1.00 | $0.40 |
| P/E Ratio | 20 | 15 |
| Dividend payout ratio | 50% | 40% |
Assume that there are no synergistic benefits as the result of the merger. Determine EPS for the combined company if Apex offers a:
20% premium for Pinnacle
40% premium for Pinnacle
50% premium for Pinnacle
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